And from the Annual Report - PDF 13
In February 2020 we made a market announcement concerning a preliminary decision of the Financial Services and Pensions Ombudsman (FSPO) regarding compensation due to a customer who was in a previously identified group within the tracker mortgage review, but where the Group had concluded no financial detriment had been incurred.
The Group is continuing to engage and consider its position. However it is unpredictable how these matters turn out, so we have made
additional provisions for €300m to reflect the combined impact of application of the compensation in that individual preliminary
decision to a wider group of around 5,900 customers in similar circumstances, together with related potential additional charges.
From PDF 18
This includes €300m additional provisions taken to cover a range of possible outcomes and related potential additional charges following a preliminary decision by the Financial Services and Pensions Ombudsman relating to a previously identified group of customers who had an
option of a prevailing tracker rate.
From PDF 58
Restitution costs include a provision of € 265 million for additional redress that may be due to a group of customers who had an option of a prevailing tracker rate. This follows a recent preliminary decision issued by the Financial Services and Pensions Ombudsman. Total potential impact is € 300 million, including a provision of € 35 million for the impact of monetary penalties from the Central Bank of Ireland included in Provision
for regulatory fines.
From PDF 197
Provisions for liabilities and commitments
The measurement of provisions, including those for customer redress and related matters, is highly judgemental. Back in 2017, following review and analysis of the parameters of the Central Bank of Ireland’s Tracker Mortgage Examination framework, the Group concluded that a cohort of customers who were never on a tracker rate would be paid compensation.
However, in January 2020, the Group received a preliminary Financial Services and Pensions Ombudsman (“FSPO”) decision which upheld a claim by an impacted customer within this cohort and awarded further redress. The Group considered this preliminary decision and recorded a provision of € 265 million based on an initial assessment of the likelihood that additional redress may be due to all customers in this cohort. The Group recognises that there is a range of possible outcomes and has created this provision, which was subject to review and approval by the Board. This represents Management’s best estimate of loss taking into account the available evidence and assessment of the potential outcomes
in finalising this matter with the relevant stakeholders.
The Committee has reviewed the position and the process for estimating the provision. Based on its assessment, the Committee has concluded that this provision is reasonable taking into account the inherent uncertainties in the calculation and the judgemental nature of key assumptions, particularly relating to the identification of impacted customers and related
redress costs.
From PDF 277
Provisions for liabilities and commitments (continued)
At 31 December 2018, a provision amounting to € 10 million was held against, what was then considered to be, the practical completion
of the identification of all impacted accounts subject to ‘customer redress and compensation’ and the on going appeals process.
In determining this provision, the Group assessed other possible redress scenarios and concluded that the possibility of a further outflow
of economic resources was remote.
However, following a complaint to the Financial Services and Pensions Ombudsman (“FSPO”) by a customer from the ‘06-09 Ts & Cs
who never had a tracker’ cohort as outlined above, the Group received a preliminary decision in January 2020 which upheld a claim for
further redress due to this impacted customer.
The Group has considered this preliminary decision and recorded a provision of € 265 million based on an initial assessment of the
likelihood that additional redress may be due to all customers in this cohort. The Group is continuing to engage and consider its position
with regard to the impact of this preliminary decision and the methodology applied by the FSPO. There are a number of issues that need
to be resolved. Accordingly, there is a range of possible outcomes, however, the provision represents the Group’s best estimate based
on the available information at this stage.
As detailed in notes 40 and 47, AIB and EBS were advised in 2018 by the CBI of the commencement of investigations as part of an
administrative sanctions procedure in connection with the Tracker Mortgage Examination. In this regard, the Group created a provision
of € 70 million for the impact of potential monetary penalties that are expected to be imposed on the Group by the CBI being its best
estimate based on external developments in the industry at 31 December 2019. This matter is still considered to be at a relatively early
stage, and the amount provided for is subject to uncertainty with a range of outcomes possible with the final outcome being higher or
lower depending on finalisation of all matters associated with the investigation. Accordingly, this is a critical accounting estimate which
could result in a material adjustment in the next financial year but it is difficult to quantify a range of outcomes.
Other than as outlined above, there is no individually significant provision that is expected to result in a material adjustment in the next
financial year.
From Page 330
Tracker Mortgage Examination
The provisions at 31 December 2019 for ‘Customer redress and compensation’, including payments arising on appeals, amounted to
a) € 265 million in respect of tracker mortgage customers - the ‘06-09 who never had a tracker’ cohort; and
b) € 6 million (31 December 2018: € 10 million) for previously identified impacted accounts.
Following a complaint to the Financial Services and Pensions Ombudsman (“FSPO”) by a customer from the ‘06-09 Ts & Cs who never
had a tracker’ cohort, the Group received a preliminary decision in January 2020 which upheld a claim for further redress due to this
impacted customer.
The Group has considered this preliminary decision and recorded a provision of € 265 million based on an initial assessment of the
likelihood that additional redress may be due to all customers in this cohort. The Group is continuing to engage and consider its position
with regard to the impact of this preliminary decision and the methodology applied by the FSPO. There are a number of issues that need
to be resolved. For further information see ‘Critical accounting judgements and estimates’ (note 2).
From PDF Page 338
47 Memorandum items: contingent liabilities and commitments, and contingent assets (continued)
Legal proceedings
The Group, in the course of its business, is frequently involved in litigation cases. However, it is not, nor has been involved in, nor are
there, so far as the Group is aware, (other than as set out in the following paragraphs), pending or threatened by or against the Group
any legal or arbitration proceedings, including governmental proceedings, which may have, or have had during the previous twelve
months, a material effect on the financial position, profitability or cash flows of the Group.
Specifically, litigation has been served on the Group by customers that are pursuing claims in relation to tracker mortgages. Customers
have also lodged complaints to the Financial Services and Pensions Ombudsman (“FSPO”) in relation to tracker mortgages issues.
In relation to one of these complaints, the FSPO has recently issued a preliminary decision which upheld a claim by a customer for
further redress – see ‘Critical accounting judgements and estimates’ (note 2).
Further claims may also be served in the future in relation to tracker mortgages. The Group will also receive further decisions by the
FSPO in relation to complaints concerning tracker mortgages.
Based on the facts currently known and the current stages that the litigation and the FSPO’s complaints process are at, it is not
practicable at this time to predict the final outcome of this litigation/FSPO complaints, nor the timing and possible impact on the Group.